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Alien – First Contract

First, let’s get this right out in the open… No one is going to “buy” your game or pay you a lump sum of money for what you’ve done so far. If you wish your game to see the game store shelves, then you need to partner with a publisher and continue to work with them and eventually get some royalty payments.

Let’s also be very clear about potentials in our hobby games industry. You’ll make maybe $500-$5000 on your game and that’s about it. Most of you will make on the lower end of that. Surely not worth the hours you put in – but that’s not why most of us do this. Again, if you’re looking to make a cash buyout this isn’t going to happen in our industry.

Let’s first get some terms straight…

Designer – The person who has the idea and develops a working prototype of a game.

Developer – The person or team that helps you take your best prototype and make it streamlined, balanced, cost-effective, and marketable. Somewhat subjective but they work for the Publisher you choose to deal with and know how to make a game “better” in the eyes of the Publisher.

Publisher – The person or company that is fronting the money for and handling the logistics of getting your game produced and to the market.

Contract – This is an agreement between the designer and the publisher to produce a game and make payments based on sales within a certain time frame.

License & Sub-license – This is typically referring to the agreement between your Publisher and another Publisher where they agree to allow for your game to be produced by another company. Usually in another country and/or language or even in digital format.

IP – Short for Intellectual Property which refers to any thematic or storyline elements of your game. It does not refer to your mechanics or the physical aspects of your game.

A Publisher will want to have you under a contract where they take ownership of everything (design, IP, name, etc) for a fee or royalty payment. They will want to exclusively own all the IP and rights to the game (at least in specific countries) until the time which they or sales deem it not worth the continued bother.

Publishers all have different ways of dealing with designers and their games. Most will appreciate your continued involvement and stick with the original themes and concepts. But it is not unheard of for entire themes to change or artistic design to go somewhere totally different then you had envisioned. Most Publishers will make minor tweaks as their in-house Developers clean up and streamline the game.

Be aware of who you’re about to “get into bed” with… a larger Publisher offering a smaller % might make you more money in the end but you also might have less control over the final product. A smaller publisher might offer you a larger % but may not have the reach to sell as much product and thus makes you less money, but they tend to be more open to allowing more of your direct involvement in the final product. Remember the Publisher will have final say on everything if you’re not comfortable with that then maybe seek to publish it yourself.

WHO’S YOUR PUBLISHER?

Make sure you understand what type of deal the Publisher wants with you. Ask them plenty of questions before signing a contract:

Do they want to just run a Kickstarter and call it quits?

Are they looking for worldwide distribution or just regional?

Will the represent your game at conventions and will they help you attend them?

Are they in hobby distribution already or do they plan to only go direct?

Do they use a company like Game Salute which is rather exclusive curtails deep discounters?

Do they have an advertising budget?

TURN OFFS

Just like you should check out the Publisher before submitting your games, they will also be checking you out. Here are some of the things that will keep the Publishers away:

If your game requires a license of another IP. Publishers rarely pickup game ideas that are based on someone else’s assets. They are hard to attain and costly.

If you insist on retaining any rights to the IP or artwork this will likely turn away any Publisher. Most will gladly have the rights return to you when they are done marketing and producing your game – but they will not be interested in any deal where they don’t actually own the rights to do with what they want while making the game.

If you have already run a fundraiser campaign (like Kickstarter.com) for your game you’ll find it nearly impossible to find a Publisher who is interested. The Publisher wants to be first at-bat and if you need their help after a fundraiser then it’s probably not worth their time, to begin with.

Many, but not all, Publishers won’t deal with a game previously released as Print and Play. The games that do follow this route tend to be the ones there were huge award-winning hits in PnP first and then went to full production.

TYPES OF CONTRACTS

Almost all contract will be exclusive, or at least exclusive to region and language. A Publisher is not going to invest a lot of time and effort to make your game better and get it to market if there is someone else out there also taking a share of that market. They will want to control all such aspects of your game.

There are several times of contracts and everyone is a bit different. But mainly the difference is based on how you’re paid.

Intent to publish: some companies may not agree to publish your game up front but would like to try to work on developing it further to a point they are comfortable offering you a full publishing contract.

% of Revenues (wholesale) – typically 5-8%

% of Sales (MSRP) – typically 3-5%

% of Earnings (Profits) – typically 15-25% – avoid these kinds of contracts unless you really trust the Publisher. To many games can be played with $.

Work For Hire – pay by the hour or a flat rate up front – do not sign these

Some Publishers are open to scaling % based on sales volumes. Don’t kid yourself though, most games do not sell more than 10,000 copies ever. In fact, most games sell less than 5000.

Some larger Publishers give advances or signing bonuses ($100-3000). If the publisher you’re working with is not in the same country as you, it would be wise to get some upfront money as it’s nearly impossible to chase down a deadbeat later.

Stay away from contracts that require you to contribute financially to the production of the game. These are not worth it as you have little control over the marketing and execution of the actual game.

Though rare, some contracts will pay the designer in full based on the number of units produced.

WHAT YOU SHOULD SEE INSIDE

Things you should look for in the contract:

2-10 copies for yourself of each revision of the game and all expansions and derivative work. The ability to purchase more at 50% off or wholesale prices.

Typically contracts are perpetual as long as we are actively marketing the game and have X number of sales per year. Some contracts have 5-year terms and require manually agreeing to continue.

Exit strategy / insolvency / lack of sales – reversion of rights back to you. Typically 5 years after last print run or 2 years after low sales.

How to handle digital sales. Usually best dealt with by just getting a % of the gross of what the Publisher takes in.

How to handle sub-licenses for other countries/languages. What is your take off of what basis?

Expansions & Sequels: Are you a must to be involved or is this not required? Rates for compensation for these should be similar to the base game unless you don’t design it.

Derivative works & Merchandise: What’s your rate of compensation? Do you have any say in the designers or products?

Time to market requirement? Usually, a Publisher is given 2 years to get the game to the market or there is a way for you to terminate the contract.

A clause to make sure your name appears on the outside of the box (hopefully the cover)

The frequency of reporting and payments? 30 days after the last Quarter is typical. What penalties are there if they fail to meet these guidelines?

What amount and type of auditing will you have access too?

Clause for how non-standard sales are handled? Such as a rate for sales at conventions. Are you allowed to sell the games you got a discount at your local conventions? Kickstarter and online direct to customers sales? With so many games being Kickstarted and sold direct to customers, you’ll need to make sure your contract also includes what pay rate you’ll get with direct sales as the publisher tends to make a higher margin on such.

Things you shouldn’t be surprised to see:

Clause to protect the publisher from any copyright infringements you might have made

LICENSE AGREEMENTS

These are different as they are giving permission to someone to produce your already finished game in another country or language. They are usually between the Publisher and another party. Not something you would normally sign.

Typical % are 8-13% of revenues with an advance. That’s what the PUBLISHER asks of the new company looking to localize your game. You should expect roughly the same percentage of that gross revenue as you’re getting from the gross revenue (not MSRP) of the game sold in its original form. So if you’re getting 5% of MSRP per unit sold, it would be reasonable for you to expect 20% of any gross royalties received by the Publisher for a licensing deal as a designer. Mainly because a license agreement might be a flat fee or some other weird math and may vary from partner to partner – not to mention conversions of currencies and that MSRP will not be exactly the same in each country.

So if you have a $50 MSRP game and it sells to distribution for $20 your normal earnings on that would be $1.20. But if they sold a license for a localization of the game in say German. That licensee would pay usually about 10% of their gross revenues (sales they make to wholesale mainly but sometimes more if they do convention sales) to your Publisher. They, in turn, would give you 20% of that. If your game then sells for 40 Euro game in Germany but they only collected 20 Euro from a distributor, they would pay your publisher around 2 Euro or $2.29 – of that, you get 20% or about .46 cents.

The thing is, your publisher doesn’t do much or take many risks for that localization copy and so they make less on a copy. Instead of $20 where they need to deduct all their costs, they are getting straight profit from the license so they really can’t play any “games” with that amount. So they can pay you based on profit in this case, but they need to give you a larger share of it.

Also note that a lot of publishers also create another rate to be paid for earnings in the Kickstarter as the publisher’s profit will be higher per unit in KS.

The short answer and default would be the same % you get off the wholesale revenue for the rest of the games. You want to make the 5% or whatever of the gross payment from the licenses. But it’s all negotiable. Some companies will give you a larger % of the Kickstarter money for example.

I know there hasn’t been activity on this thread for a while, but this has been very informative and I have a follow up question. If a publisher offers to purchase the IP of a game at the outset, instead of paying a royalty is this normal?

For example if a designer was offered $2,000 to purchase the rights to a game without any royalties after the game is published and being sold. Also should a contract like this include a time-frame in which the intellectual property reverts back to the designer.

It’s unusual but not unheard of. In many cases you’re lucky to make $2000 over the life of a game. Of course if it is a hit (which is near impossible these days) you’d make more in royalties. If the game isn’t 99% done, then they are likely to just want to do the rest themselves for one reason or another and take you out of the picture. I guess you have to choose yourself. It’s a fair offer in today’s market.

“If you have already run a fundrasier campaign (like Kickstarter.com) for your game you’ll find it nearly impossible to find a Publisher who is interested. The Publisher wants to be first at bat and if you need their help after a fundrasier then it’s probably not worth their time to begin with.”

Do you find that this is still true given the current games landscape? I wonder if games are trending to an “incubator state” where publishers want to see some general independent success before capitalizing on a game idea. For example, the recent Hasbro competitions that ask creators to make crowdfunding campaigns before Hasbro decides to talk to them further about publishing the game.

Interesting you brought that up. While the vast majority of publishers will turn you away, there has been some trend with popular games still landing contracts. Renegade Games for one has been known to do this. So it’s getting to be more acceptable with the right games – but still most companies will not touch it.

No NET PROFITS is a very bad idea. If you really trust them then ok, but that number should be like %20+ not 8%. Net profits can be manipulated so you never see any money. It’s common they take the trademark as they are marketing and branding the game. But I think I know the company you’re speaking of and they have a very unfair contract that even includes first rights of refusal for future work you do. Do not sign with them.

As for a legal advice, you should always get a lawyer when you don’t understand, but most of these contracts you can figure out on your own. But since you’re questioning this one and didn’t notice how unfair it was, that’s kind of proof you should pay a lawyer. Though finding one that knows our industry isn’t that easy.

James, great article. You mentioned not to expect to obtain IP rights, so if I had a board game about let’s say little blue animals who were white pants, living under mushrooms and wanted to pitch the idea to a cartoon or book publisher the game board publisher wouldn’t let me keep these rights?

That seems very far from how other publishing worlds works, have you written any articles on how publishers would deal with agents? As a designer, with my name on the box, I’d want to be upfront and personal and I’d want the publisher to pay for any travel and hype which I’d be doing, I’d be my own game ambassador in other words.

Based on your articles and others it seems like the best way for me to take my game concepts to market would be to hire an agent. What are your thoughts?

Never heard of that. Usually, the publisher is paying for the booth and hotels and stuff, so they take all the money from a show and you get your normal rate. If you wish to do your own show it’s reasonable that they just sell you some at wholesale or thereabouts. Again, it’s up to you to negotiate whatever is important to you – but the more demands you have the less likely they are to work with you. There are thousands of people with game designs trying to get published.

It’s a contract so it’s all up to you to negotiate what you want. But in the board game industry. of several dozen publishers I know, none of them would let you keep the IP. An Agent is for working with large mainstream publishers and half the time they are a rip off scam. So be careful there. I doubt you’ll find many publishers covering all your bills, but sure, they can help out at least. I’ve paid for hotel and convention entry for my designers – usually though you pay travel expenses. Please use my Facebook forums for asking more involved questions.

Thank you for this article, a lot of useful information here. I am very new to the world of game design–in fact, I’m more interested in writing fiction. Right now I’m working on a fantasy trilogy, and I started to get the idea that it would be really fun to try to develop a game based on the story. I’m still pretty far from a finished product, both on the game and the books, but this article got me wondering about how the IP rights would work if I wanted to try to get both the books and the game published. What kind of issues would I be dealing with? Are there publishing companies that deal with both? Thanks again!

Most publishers would not like spending money and effort promoting an IP that you wish to retain. But if your fiction is ALREADY selling with a fan base then it adds to the equation. Else it’s not helping you.